The exam tests their understanding.
Meaning: This sentence describes an exam that is designed to measure how well students have understood the material they have been taught.
Choice of Words: Exam is a noun that refers to a formal test of knowledge or skills. Tests is a verb that means to evaluate or assess someone's knowledge or skills. Their is a possessive pronoun that refers to the students. Understanding is a noun that refers to the ability to comprehend or grasp something. The is a definite article that refers to a specific exam.
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